ACIT CEN CIR 2, THANE V. VEENA DEVELOPERS, THANE

ITA 6806/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8222 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Bench Allotted: F
• Next Hearing Date: 29-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-11-2012
• Court: TRIBUNAL
• Assessee Lawyers: IN A Y IS AS UNDER SHR
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; ,OA ,OA ,OA ,OA JH JKTSUNZ] YS[KK LNL; JH JKTSUNZ] YS[KK LNL; JH JKTSUNZ] YS[KK LNL; JH JKTSUNZ] YS[KK LNL; DS LE{K DS LE{K DS LE{K DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.6806/MUM/2012 ASSESSMENT YEAR: - 2008-09 ITA NO.6807/MUM/2012 ASSESSMENT YEAR: - 2009-10 ITA NO.6808/MUM/2012 ASSESSMENT YEAR: - 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -2 THANE, PAWAR INDUSTRIAL ESTATE, EDULJI ROAD, CHARAI, THANE 4 00 601. VS. M/S VEENA DEVELOPERS NIKUNJ HOUSE, MANAV MANDIR, AMBADI RD. VASAI (W) THANE 401202. PAN: AAEFV3871C APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THESE THREE APPEALS BY THE REVENUE ARE DIRECTED AGAI NST THREE SEPARATE ORDERS OF CIT(A) ALL DATED 14-08-2012, ARISING FROM TH E ASSESSMENT U/S 143(3) R.W.S 153A OF INCOME TAX ACT FOR THE A.Y. 2008-09 T O 2010-11 RESPECTIVELY. THE REVENUE HAS RAISED COMMON GROUNDS IN THESE APPEALS, THE GROUND RAISED BY THE REVENUE IN A.Y. 2008-09 IS AS UNDER:- REVENUE BY SHRI R.R. PRASAD ASSESSEE BY SHRI AJAY SINGH & NEELAM JADHAV DATE OF HEARING 28-10-2014 DATE OF PRONOUNCEMENT 31.10.2014 M/S VEENA DEVELOPERS 2 | P A G E 01. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD./ CIT(A) IS CORRECT IN ALLOWING DEDUCTION U/S 80IB(10) OF RS. 1,77,51,803/- WITHOUT APPRECIATING THE FACT THAT I N RESPECT OF VEENA SANTOOR PROJECT DEVELOPMENT RIGHTS OF COMMERCIAL U NITS WERE TRANSFERRED TO ITS SISTER CONCERN M/S NIKUNJ DEVELO PERS TO AVAIL THE DEDUCTION U/S 80IB(10) OF HE INCOME TAX ACT 1961. 2. IN THIS CASE A SEARCH & SEIZURE ACTION U/S. 132( 1) OF THE ACT WAS CARRIED OUT ON 10.07.2009. ACCORDINGLY, NOTICES U/S. 153A WERE ISSUED TO THE ASSESSEE. IN RESPONSE TO NOTICES ISSUED U/S 153A, THE ASSESSEE FI LED RETURN OF INCOME, WHEREIN CLAIMED DEDUCTION U/S 80IB(10). ON EXAMINATION OF DETA ILS FURNISHED, THE ASSESSING OFFICER NOTED THAT IN RESPECT OF THE HOUS ING PROJECT VEENA SANTOOR, THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) OF THE AC T. WHEREAS, THE COMMERCIAL AREA IN THIS HOUSING PROJECT WAS APPROXIMATELY 12,3 81 SQ. FT. ACCORDINGLY, THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY THE DE DUCTION U/S. 80IB(10) BE NOT DISALLOWED. THE ASSESSEE CONTENDED THAT THE PROJECT W AS APPROVED PRIOR TO 01.04.2005 AND, THEREFORE, THE AMENDED PROVISIONS OF SECTION 80IB(10) W.E.F 1.4.2005 VIDE FINANCE ACT, 2004 WHEREBY THE CONDITION OF MAXIMUM AREA OF COMMERCIAL PROJECT IS PROVIDED UNDER CLAUSE (D) IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT T HE CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB(10) ON T HE GROUND THAT AREA OF COMMERCIAL ESTABLISHMENT IN THE PROJECT IS MORE THA N THE LIMIT PRESCRIBED UNDER CLAUSE (D) OF SECTION 80IB(10). 3. THE ASSESSEE CHALLENGED THE ACTION OF ASSESSING O FFICER BEFORE CIT(A). THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY NOTING THE FACT THAT THE ASSESSEE HAS NOT CLAIMED DEDUCTION U/S 80IB(10) IN RESPECT OF THE COMMERCIAL ESTABLISHMENT IN THE PROJECT AND THE CLAIM IS ONLY WITH RESPECT TO THE HOUSING PROJECT. CIT(A) REFERRED THE DECISION OF THIS TRIBUNAL IN THE CASE OF KHYATI FINANCIAL SERVICES, (6 TAXMANN.COM 56) AND SUBMITTED THAT THE TRIBUNAL IN TH E SAID CASE HELD THAT THERE M/S VEENA DEVELOPERS 3 | P A G E IS NO VIOLATION BY THE ASSESSEE OF ANY CONDITION PRE SCRIBED, THE CLAIM OF ASSESSEE SHOULD BE ALLOWED. 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSI DERED THE RELEVANT MATERIAL ON RECORD. THE THRESHOLD QUESTION ARISES I S REGARDING THE APPLICABILITY OF THE AMENDED PROVISIONS OF SECTION 80IB(10) W.E.F 1.4 .2005 VIDE FINANCE ACT, 2004, IN RESPECT OF THE PROJECT OF THE ASSESSEE WH ICH WAS APPROVED PRIOR TO 1.04.2005. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS RELIED UPON THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT DATED 9 TH SEPTEMBER 2014 IN THE CASE OF CIT VS. M/S HAPPY HOME ENTERPRISES, IN INCO ME TAX APPEAL NO. 201 OF 2012 AS WELL AS IN THE CASE OF CIT VS. M/S KANAKIA SPACES PVT. LTD. IN INCOME TAX APPEAL NO. 308 OF 2012. WE FIND THAT AN IDENTICAL QU ESTION FELL FOR CONSIDERATION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS HAPPY HOME ENTERPRISES (SUPRA) AND CIT VS. KANAKIA SPACES PVT. LTD (SUPRA), WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT AFTER CONSIDERING THE ENTIRE HISTORY OF SECTION 80IB(10) AS WELL AS THE VARIOUS DECISION ON THIS POI NT HELD IN PARA 35 AS UNDER:- 35. HOWEVER, THE PROVISIONS OF SECTION 80-IB(10) W ERE SUBSTANTIALLYAMENDED BY WAY OF FINANCE (NO.2) ACT, 2004 W.E.F. 1ST APRIL, 2 005. AS CAN BE NOTED FROM THE AMENDED PROVISIONS, THERE WERE SEVERAL CONDITIONS T HAT WERE IMPOSED IN THE NEWLY SUBSTITUTED SECTION 80-IB(10) THAT WERE ABSENT IN T HE SAID SECTION PRIOR TO ITS AMENDMENT. ONE SUCH CONDITION INSERTED W.E.F. 1ST A PRIL, 2005 WAS CLAUSE (D) THAT PUT A RESTRICTION ON THE QUANTUM OF COMMERCIAL AREA THAT COULD BE INCLUDED IN A HOUSING PROJECT IN ORDER TO ENTITLE THE ASSESSEE TO CLAIM THE DEDUCTION AS SET OUT IN THE SAID SECTION. IT IS PERTINENT TO NOTE THAT IN T HE APPEALS BEFORE US, IT IS AN ADMITTED FACT THAT THE HOUSING PROJECTS WERE APPROV ED PRIOR TO 31ST MARCH, 2005. IN ITXA NO.308 OF 2012, IN FACT, THE PROJECT WAS EV EN COMPLETED PRIOR TO 31ST MARCH, 2005 AND ONLY THE PROFITS WERE OFFERED TO TAX IN A. Y. 2005-06. WE DO NOT THINK THAT THE LEGISLATURE INTENDED TO GIVE ANY RETROSPECTIVIT Y TO CLAUSE (D) OF SECTION 80- IB(10). THIS MORE SO BECAUSE IT IS CLEARLY A CONDIT ION THAT RELATES TO AND/OR IS LINKED WITH THE APPROVAL AND CONSTRUCTION OF THE HOUSING P ROJECT. AT THE TIME WHEN THE HOUSING PROJECT IS APPROVED BY THE LOCAL AUTHORITY, IT DECIDES, SUBJECT TO ITS OWN RULES AND REGULATIONS, WHAT QUANTUM OF COMMERCIAL A REA IS TO BE INCLUDED IN THE SAID PROJECT. IT IS ON THIS BASIS THAT BUILDING PLA NS ARE APPROVED BY THE LOCAL AUTHORITY AND CONSTRUCTION IS COMMENCED AND COMPLET ED. IT IS VERY DIFFICULT, IF NOT M/S VEENA DEVELOPERS 4 | P A G E IMPOSSIBLE TO CHANGE THE BUILDING PLANS AND / OR AL TER CONSTRUCTION MIDWAY, IN ORDER TO COMPLY WITH CLAUSE (D) OF SECTION 80-IB(10 ). IT WOULD BE HIGHLY UNFAIR TO REQUIRE AN ASSESSEE TO COMPLY WITH SECTION 80-IB(10 )(D) WHO HAS GOT HIS HOUSING PROJECT APPROVED BY THE LOCAL AUTHORITY, BEFORE 31S T MARCH, 2005 AND HAS EITHER COMPLETED THE SAME BEFORE THE SAID DATE OR EVEN SHO RTLY THEREAFTER, MERELY BECAUSE THE ASSESSEE HAS OFFERED ITS PROFITS TO TAX IN A.Y. 2005- 2006 OR THEREAFTER. REQUIRING THE ASSESSEE TO COMPLY WITH THE CONDITION SET OUT I N CLAUSE (D) OF SUB-SECTION (10) OF SECTION 80-IB MERELY BECAUSE HE HAS OFFERED HIS PR OFITS TO TAX IN A.Y. 2005-06 OR THEREAFTER, EVEN THOUGH HIS HOUSING PROJECT WAS APP ROVED BEFORE 31ST MARCH 2005, WOULD BE REQUIRING THE ASSESSEE TO VIRTUALLY DO A H UMANLY IMPOSSIBLE TASK. THIS, IN OUR OPINION, COULD NEVER HAVE BEEN THE INTENTION OF THE LEGISLATURE. IN FACT, TO OUR MIND, IT WOULD RUN COUNTER TO THE VERY OBJECT FOR W HICH THESE PROVISIONS WERE INTRODUCED, NAMELY TO TACKLE THE SHORTAGE OF HOUSIN G IN THE COUNTRY AND ENCOURAGE INVESTMENT THEREIN BY PRIVATE PLAYERS. IT IS THEREF ORE CLEAR THAT CLAUSE (D) OF SUB- SECTION (10) OF SECTION 80-IB CANNOT HAVE ANY APPLI CATION TO HOUSING PROJECTS THAT ARE APPROVED BEFORE 31ST MARCH, 2005. THE SAID CLAU SE (D) BEING INEXTRICABLY LINKED TO THE DATE OF APPROVAL OF THE HOUSING PROJECT, IT WILL HAVE TO BE HELD THAT THE SAID CLAUSE OPERATES ONLY PROSPECTIVELY I.E. FOR HOUSING PROJECTS APPROVED AFTER 1ST APRIL, 2005. THIS IS NOTWITHSTANDING THE FACT THAT THE PRO FITS WERE OFFERED TO TAX BY THE ASSESSEE FOR THE A.Y. 2005-06 OR THEREAFTER. 5. FURTHER AFTER CONSIDERING THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANR. V/S G.R. DEVELOPERS (353 IT R 1) AS WELL AS THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF MANAN CO RPORATION V/S ASSISTANT COMMISSIONER OF INCOME TAX (356 ITR 44). THE HONBL E HIGH COURT HAS HELD IN PARA 40 AND 41 AS UNDER:- 40. AS CAN BE DISCERNED FROM THE SAID JUDGEMENT, T HE KARNATAKA HIGHCOURT CATEGORICALLY HELD THAT THE SAID PROVISION VIZ. SUB-SECTION (14)( A) OF SECTION 80-IB INSERTED W.E.F. 1ST APRIL, 2005 APPLIED ONLY TO HOUSING PROJECTS WHICH WERE APPROVED SUBSEQUENT TO 1ST APRIL, 2005. ALTHOUGH, THE KARNATAKA HIGH COURT WAS CONSTR UING SUB-SECTION (14)(A) OF SECTION 80-IB THAT DEFINED THE WORDS BUILT-UP AREA, WE FI ND THAT THE SAME REASONING CAN EVEN BE APPLIED TO CLAUSE (D) OF SUB-SECTION (10) OF SECTIO N 80-IB. WE SHOULD KEEP IN MIND THAT THE OBJECT OF SECTION 80-IB(10) WAS TO BRING IN INVESTM ENTS AND TO ENCOURAGE INFRASTRUCTURAL DEVELOPMENT OF MIDDLE LEVEL HOUSING PROJECTS. IF WE WERE TO HOLD THAT CLAUSE (D) OF SUB- SECTION (10) OF SECTION 80-IB WAS TOBE COMPLIED WIT H EVEN BY AN ASSESSEE WHOSE HOUSING PROJECT WAS APPROVED BEFORE 31ST MARCH 2005, IT WOU LD NEGATE THE VERY OBJECT AND PURPOSE FOR WHICH SECTION 80-IA(4F) AND THEREAFTER SECTION 80-IB(10) WERE INTRODUCED IN THE FIRST PLACE. IN THAT VIEW OF THE MATTER, THE CONDITION/RE STRICTION IMPOSED BY CLAUSE (D) OF SECTION 80-IB(10) AND WHICH CAME INTO EFFECT FROM 1ST APRIL 2005, CAN APPLY ONLY TO SUCH HOUSING PROJECTS WHICH ARE APPROVED ON OR AFTER 1ST APRIL, 2005. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THE SAID JUDGMENT OF THE KARNATAKA HIG H COURT WAS CHALLENGED BEFORE THE SUPREME COURT AND THE SPECIAL LEAVE PETITION AGAINS T THE SAME WAS DISMISSED ON 7TH JANUARY, 2013. M/S VEENA DEVELOPERS 5 | P A G E 41. WE ALSO FIND THAT A SIMILAR ISSUE AS THE ONE RA ISED IN THESE APPEALS CAME UP FOR CONSIDERATION BEFORE THE DIVISION BENCH OF GUJARAT HIGH COURT IN THE CASE OF MANAN CORPORATION V/S ASSISTANT COMMISSIONER OF INCOME TA X, REPORTED IN (2013) 356 ITR 44 (GUJ). IN THE FACTS BEFORE THE GUJARAT HIGH COURT, ONE OF THE GROUNDS ON WHICH THE ASSESSEE WAS DENIED THE DEDUCTION UNDER SECTION 80-IB(10) WA S THE NON-FULFILLMENT OF CLAUSE (D) THEREOF. THE ASSESSMENT YEAR IN QUESTION BEFORE THE GUJARAT HIGH COURT WAS A.Y. 2006-07. IT WAS THE CASE OF THE ASSESSEE BEFORE THE GUJARAT HIGH COURT THAT A CONDITION OF LIMITING COMMERCIAL ESTABLISHMENTS / SHOPS TO 5% OF THE AGGR EGATE BUILT-UP AREA OF THE HOUSING PROJECT OR 2,000 SQ.FT. WHICHEVER IS LESS, CAME INT O FORCE W.E.F. 1ST APRIL, 2005 AND THEREFORE THE SAME COULD BE MADE APPLICABLE TO PROJECTS APPRO VED ONLY ON OR AFTER 1ST APRIL, 2005. WHILST DEALING WITH THE AFORESAID CONTENTION AND AF TER ANALYSING THE PROVISIONS OF SECTION 80-IB(10), THE GUJARAT HIGH COURT HELD AS UNDER :- 34. NEITHER THE ASSESSEE NOR THE LOCAL AUTHORITY R ESPONSIBLE TO APPROVE THE CONSTRUCTION PROJECTS ARE EXPECTED TO CONTEMPLATE FUTURE AMENDME NT IN THE STATUTE AND APPROVE AND / OR CARRY OUT CONSTRUCTIONS MAINTAINING THE RATIO OF RESIDENTIAL HOUSING AND COMMERCIAL CONSTRUCTION AS PROVIDED BY THE AMENDED ACT BEING 3 PER CENT OF THE TOTAL BUILT-UP AREA OR 5,000 SQ.FEET, WHICHEVER IS HIGHER (NOW IN THE POST -2010 PERIOD) OR 5 PER CENT OF THE AGGREGATE BUILT-UP AREA OR 2,000 SQ.FEET, WHICHEVER IS LESS. THE REVENUE IS ALSO IN ERROR TO SUGGEST THAT EVEN IF SUCH CONDITIONS ARE ONEROUS, T HEY ARE REQUIRED TO BE FULFILLED. THE ENTIRE OBJECT OF SUCH DEDUCTION IS TO FACILITATE TH E CONSTRUCTION OF RESIDENTIAL HOUSING PROJECT AND WHILE APPROVING SUCH PROJECT WHEN INITIALLY THE RE WAS NO SUCH RESTRICTION IN TAXING STATUTE AND THE PERMISSIBLE RATIO FOR COMMERCIAL US ER MADE 5 PER CENT TO THE TOTAL BUILT-UP AREA BY WAY OF AMENDMENT AND REDUCTION OF WHICH BY FURTHER AMENDMENT TO 3 PER CENT OF THE TOTAL BUILT-UP AREA, HAS TO BE NECESSARILY CONS TRUED ON PROSPECTIVE BASIS. 35. AS IS VERY APPARENT FROM THE RECORD, THERE WAS NO CRITERIA FOR MAKING COMMERCIAL CONSTRUCTION PRIOR TO THE AMENDED SECTION AND THE P LANS ARE APPROVED AS HOUSING PROJECTS BY THE LOCAL AUTHORITY FOR BOTH THE PROJECTS OF THE APPELLANT. PERMISSION FOR CONSTRUCTION OF SHOPS HAS BEEN ALLOWED BY THE LOCAL AUTHORITY IN AC CORDANCE WITH RULES AND REGULATIONS, KEEPING IN MIND PRESUMABLY THE REQUIREMENT OF LARGE TOWNSHIPS. HOWEVER, THE PROJECTS ESSENTIALLY REMAINED RESIDENTIAL HOUSING PROJECTS A ND THAT IS ALSO QUITE APPARENT FROM THE CERTIFICATES ISSUED BY THE LOCAL AUTHORITY AND, THE REFORE, NEITHER ON THE GROUND OF ABSENCE OF SUCH PROVISION OF COMMERCIAL SHOPS NOR ON ACCOUNT O F SUCH COMMERCIAL CONSTRUCTION HAVING EXCEEDED THE AREA CONTEMPLATED IN THE PROSPE CTIVE AMENDMENT CAN BE MADE APPLICABLE TO THE APPELLANT-ASSESSEE WHOSE PLANS AR E SANCTIONED AS PER THE PREVALENT RULES AND REGULATIONS BY THE LOCAL AUTHORITY FOR DENYING THE BENEFIT OF DEDUCTION OF PROFIT DERIVED IN THE PREVIOUS YEAR RELEVANT TOTHE ASSESSMENT YEAR AS MADE AVAILABLE OTHERWISE UNDER THE STATUTE. 6. THERE IS NO DISPUTE THAT IN THE CASE OF THE ASSE SSEE, THE PROJECT IN QUESTION WAS APPROVED PRIOR TO 1.4.2005 ON 10.01.2005 BY THE LOCAL AUTHORITY. THEREFORE, FOLLOWING THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HAPPY HOME ENTERPRISES (SUPRA) AS WELL AS CIT VS. K ANAKIA SPACED PVT. LTD., WE M/S VEENA DEVELOPERS 6 | P A G E DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THE SAME IS UPHELD 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 31-1 0-2014 SD/- SD/- ( RAJENDRA ) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 31-10 -2014 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI